2 UK shares I’d like to buy for market-beating cash yields!

When looking for shares to buy, I use a value, dividend and income approach. For example, here are two cheap UK stocks that offer top dividend yields!

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As a value investor, I rely on stock screeners to find shares to buy. Indeed, during 2022, my wife bought 11 new shares for our portfolio. We own these two for their delicious dividend yields and I’d like to buy more when I have the cash.

My first dividend dynamo is Legal & General Group (LSE: LGEN), a business I admire for pedigree and performance. Founded in 1836, L&G is a leading provider of life assurance, savings and investments. It has 10m customers and manages £1.4trn in assets.

Plunging stock and bond prices in 2022 were painful for L&G and its clients. From their 52-week high of 295.7p on 3 February, the shares collapsed to 201.4p on 13 October. They have since rebounded, closing at 254.9p on Friday. This values the FTSE 100 firm at £15.2bn — 12.7% lower over one year.

As with most value shares I buy, L&G stock looks cheap to me. It trades on a price-to-earnings ratio of 7.5, for an earnings yield of 13.3% — a considerable discount to the London market. Furthermore, its chunky dividend yield of 7.3% a year is covered 1.8 times by earnings. To me, this indicates that this cash payout is solid, with room to grow.

However, if financial markets slump again, then L&G’s earnings and share price could take a beating. Should this happen, I may well buy even more shares for their long-term passive income!

#2: Vodafone

Our most recent share purchase is telecoms stalwart Vodafone (LSE: VOD), a leading provider of fixed, broadband and mobile communications. The Newbury, Berkshire-based multinational was founded in 1982 and today has more than 300m customers in Europe and Africa.

Vodafone equipment was used to make the UK’s first mobile call on 1 January 1985 and carried the world’s first SMS text message (“Merry Christmas“) in December 1992. Alas, Vodafone has fallen a long, long way since it was Europe’s biggest company during the dotcom boom that turned to bust in 2000.

At Friday’s closing price of 91.88p, this FTSE 100 firm is valued at £25bn — a mere fraction of its peak value of roughly £200bn. In early December, I spotted that the Vodafone share price was dropping steeply, so my wife pounced, buying at 90.2p a share.

Typically, the price then immediately plunged, dropping to a 52-week low of 83.24p on 16 December. However, the shares have since recovered to their current level of 91.88p, producing a tiny paper profit of 1.9% from our newest holding. Phew.

If I had more money to buy shares, I’d probably add more Vodafone stock today. First, because they’re down 21.8% over the past year, versus a 6.5% gain for the FTSE 100. Second, because their price-to-earnings ratio of 14.4 and earnings yield of 7% are in line with the wider Footsie.

Third, I’m drawn to Vodafone’s meaty dividend yield of 8.4% a year, despite it being covered only 0.8 times by earnings. Though the group carries a mountain of net debt on its balance sheet, this seems manageable to me. And I’m hopeful that spring price rises will boost Vodafone’s revenues and earnings, fingers crossed.

In summary, I’d happily buy more of these two shares today — if I had some spare cash for investing, that is!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliff D’Arcy has an economic interest in Legal & General Group and Vodafone shares. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

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